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Rise in hotel fees could drive demand for serviced apartments

Wednesday, January 2, 2013

Choosing where to stay is a common challenge for many business travelers. While corporate suites at chain hotels are a popular choice among many executives, rising occupancies and increased fees are making alternatives such as corporate housing and serviced apartments more attractive. This trend could continue into 2013, as rates at chain hotel properties continue to rise.

Fewer rooms, more money
According to Business Travel News, hotel occupancy is increasing in many regions around the world, leading to heightened competition for available space. This, in turn, is seen as an opportunity for chain hoteliers, many of which have increased rates to maximize profitability in a crowded market.

The news source reports that the average daily rate (ADR) at hotels across North America rose by 3.6 percent last year. Occupancy in hotels through the region increased by 56.5 percent in the U.S. In terms of ADR hikes, Toronto, Canada, saw the greatest rise in fees of 11.5 percent, followed by Santiago, Chile, and Los Angeles, California, with 11.2 and 8.9 percent increases respectively.

In Europe, occupancy rates remained largely unchanged, but business travelers were still subject to an average ADR increase of 2.4 percent. Some cities, such as Edinburgh, Frankfurt and Reykjavik reported higher than average increases in ADR, each with price hikes of more than 10 percent.

While more expensive fees will not deter some business travelers, many companies are being increasingly selective about where their executives stay during business trips. As such, the popularity of corporate accommodations and short term rental apartments has the potential to significantly impact the corporate hospitality industry in 2013.

Late last year, the Federal Trade Commission (FTC) issued a series of warnings to various hotel management companies about their dishonest pricing structures. However, some experts argued that hotels' pricing policies were not always deliberately misleading.

"I think there will be much more disclosure about the fees, and that's good for the industry because consumers will be more informed," said Bjorn Hanson, dean of the Tisch Center for Hospitality, Tourism and Sports Management at New York University, as quoted by the news source. "I don't think the fees have been hidden or secret or surprise. There's been a burden on the consumer to find them, but I never believed that these were meant to defraud consumers."

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